The rapid growth of interest in staking ether (ETH) – locking coins in the Ethereum network to earn passive yield – has captured the attention of the crypto community. Since the implementation of the Shapella or Shanghai upgrade on April 12, more than 4.4 million coins have been deposited into the staking contract, bringing the total to 22.58 million.
This increase in demand for staking could be attributed to large Ether holders who seek to generate passive income instead of liquidating their holdings. Analysts at Bitfinex predict that this trend will likely persist, as deflationary forces are expected to significantly boost the price of Ether.
Although the waiting time for staking has exceeded one month, Ether holders eager to become validators on the network still need to wait for 36 days. Currently, there are more than 50,000 prospective validators in the queue. Staking ether offers an annualized yield of around 4% to 5%, which has encouraged many Ether owners to become network validators.
Staking as a passive investment began gaining traction after Ethereum’s Beacon Chain went live in December 2020. For three years, stakers were unable to withdraw locked coins at will, exposing them to Ether price fluctuations. The Shapella upgrade has now de-risked staking by allowing users to unlock their coins whenever they wish.
According to analysts from Bitfinex, the recent withdrawal flexibility in ETH staking, brought about by the Shapella upgrade, has reduced the perceived risk for many investors. They noted that before the upgrade, potential stakeholders might have been deterred from staking their ETH tokens due to concerns about funds being locked for prolonged periods.
However, the surge in staking interest has not yet led to a sustained bull run for ether. After rising by 11.5% to $2,140 in the four days following the Shapella upgrade, the cryptocurrency has since retreated to trade at $1,850 at press time.
In conclusion, the Shapella upgrade has increased demand for ETH staking, offering crypto enthusiasts an opportunity to generate passive income while potentially benefiting from future price increases. Despite the lengthy waiting time to become a validator, interest remains high, signaling a growing confidence in this novel investment strategy. Although the impact on Ether’s price is yet to be determined, the outlook appears promising for those willing to explore this avenue in the crypto landscape.
Source: Coindesk
